South Africa Production Rebates Under Fire

The Motion Picture Assn. has raised concerns that recent changes to South Africa’s tax incentive scheme and other regulatory proposals could stunt the development of the country’s film industry, according to an MPA rep.

Under the new guidelines, productions that fail to meet certain benchmarks for supporting black-owned businesses are faced with the prospect of not receiving any cash rebate, even as their eligibility won’t be determined until after production wraps. Speaking on behalf of the MPA, Marianne Grant described the new tax rules as “an untenable situation for any producer’s budget, since they all need transparency and predictability before production can actually begin.”

Economic transformation has been a policy cornerstone of the ruling African National Congress (ANC), the party of Nelson Mandela that has governed South Africa since the end of apartheid. Nearly a quarter-century since the beginning of black majority rule, economic power remains largely concentrated in the hands of the white minority.

The imbalances extend to the film sector, a problem the Dept. of Trade & Industry (DTI) has sought to redress since it introduced the cash rebate in 2004. Measures like the emerging black filmmakers incentive, which offers a 50% cash rebate to eligible productions, have been transformative for young black filmmakers, while the rebate more broadly has been an industry pillar during uncertain economic times, luring recent shoots like HBO’s Cinemax series “Warrior” and MRC/Sony’s “The Dark Tower” (pictured).

As of Sept. 1, the DTI has begun mandating that a minimum of 20% of qualifying local spend on goods and services procured for foreign productions and co-productions goes to majority black-owned companies. Productions determined not to meet that benchmark won’t receive any payment of the cash rebate, even as industry sources say the DTI hasn’t offered enough clarity on exactly how those expenditures will be calculated.

That uncertainty could discourage foreign producers. “Film and television production is a high-risk business, and to manage this risk, we need a tax system with stable incentives to create sustainable jobs across all strata, and a copyright system that protects the sector, its creators and their work,” said Grant. “The MPA has sought to work collaboratively to propose alternative measures which would achieve the same objectives without the current levels of risk.”

South Africa has struggled with economic transformation under its Broad-Based Black Economic Empowerment program, due to persistent inequalities dating back to the apartheid era. Many industries, such as tourism, continue to lag in efforts to meet compliance requirements that push for more black ownership in business. That creates added difficulties for foreign productions that rely on a wide range of services when shooting in the country.

Grant praised the DTI’s transformation efforts, and noted that MPA members have their own role to play in support of South Africa’s push for economic equality. “We share the same objectives as the government and we believe that regulations can be introduced in a practical way and according to a realistic timetable, and with robust public consultation where that is still needed,” she said.